Accounting Chp 4 & 5

The financial statement which summarizes operating, investing, and financing activities of an entity for a period of time is the:

statement of cash flows.

Which of the following best exemplifies a contingency that is reported in the notes to the financial statements? Estimated loss from an ongoing lawsuit. Loss from a lawsuit settled out of court prior to the end of the fiscal year. Warranty claims on future sales. Losses from potential future lawsuits.

stimated loss from an ongoing lawsuit.

In calculating earnings per share, companies deduct preferred dividends from net income if:

the dividends are declared.

Current assets are presented in the balance sheet in order of:

their liquidity.

What might a manager do during the last quarter of a fiscal year if she wanted to decrease current annual net income?

Delay shipments and sales to customers until after the end of the fiscal year.

Which of the following items will not appear in the retained earnings statement? Discontinued operations Prior period adjustment Net loss Dividends

Discontinued operations

Which of the following items would be reported net of tax on the face of the income statement? Unusual gain Prior period adjustment Discontinued operations Change in realizability of receivables

Discontinued operations

Which of the following earnings per share figures must be disclosed on the face of the income statement? EPS for income before taxes. EPS for gross profit. The effect on EPS from unusual items. EPS for income from continuing operations

EPS for income from continuing operations.

The balance sheet is useful for analyzing all of the following except liquidity. solvency. profitability. financial flexibility.

profitability.

Treasury stock should be reported as a:

reduction of stockholders' equity

The major elements of the income statement

revenues, expenses, gains, and losses.

A general description of the depreciation methods applicable to major classes of depreciable assets...

should be included in corporate financial statements or notes thereto.

The single-step income statement emphasizes...

total revenues and total expenses.

A generally accepted method of valuation is:

trading securities at market value AND accounts receivable at net realizable value

Sheridan Company had the following account balances: Sales revenue $ 445000 Cost of goods sold 225000 Salaries and wages expense 32000 Depreciation expense 59000 Dividend revenue 10500 Utilities expense 22000 Rent revenue 58500 Interest expense 35000 Sales returns and allow. 33500 Advertising expense 40000 What would Sheridan report as total expenses in a single-step income statement? $446500 $413000 $423500 $188000

$413000

he following information was extracted from the 2017 financial statements of Wildhorse Co.: Income from cont. operations before income tax $703000 Selling and administrative expenses $479000 Income from continuing operations $503500 Gross profit $1358000 The amount reported for other expenses and losses is: $199500. $176000. $24500. $224000.

$176000

In 2017, Ivanhoe Company reported net income of $203000. It declared and paid common stock dividends of $22000 and had a weighted average of 100000 common shares outstanding. Compute the earnings per share to the nearest cent. $2.25 $2.03 $0.44 $1.81

$2.03

For Sheridan, the following information is available: Capitalized leases $552000 Trademarks $268000 Long-term receivables $217000 In Sheridan's balance sheet, intangible assets should be reported at: $769000. $820000. $268000. $485000.

$268000

Which of the following is a contra account? Premium on bonds payable Unearned revenue Patents Accumulated depreciation

Accumulated depreciation

It is mandatory that the essential provisions of which of the following be clearly stated in the notes to the financial statements? Stock option plans. Pension obligations. Lease contracts. All of these answer choices are correct.

All of these answer choices are correct.

Which of the following is not an acceptable major asset classification? Long-term investments Property, plant, and equipment Current assets Deferred charges

Deferred Charges

The stockholders' equity section is usually divided into what three parts? Capital stock, appropriated retained earnings, unappropriated retained earnings Preferred stock, common stock, treasury stock Preferred stock, common stock, retained earnings Capital stock, additional paid-in capital, retained earnings

Capital stock, additional paid-in capital, retained earnings

Which of the following events will appear in the cash flows from financing activities section of the statement of cash flows? Cash received as repayment for funds loaned. Cash purchases of bonds issued by another company. Cash purchase of treasury stock. Cash purchases of equipment.

Cash purchase of treasury stock.

What is a required disclosure in the income statement when reporting the disposal of a component of the business?

Earnings per share from continuing operations, discontinued operations, and net income should be disclosed on the face of the income statement.

Which of the following is not a required supplemental disclosure for the balance sheet? Financial forecasts Contingencies Contractual situations Accounting policies

Financial forecasts

Which of the following is NOT a long-term investment? Cash surrender value of life insurance Franchise A sinking fund Land held for speculation

Franchise

A correction of an error in prior periods' income will be reported. In the income statement / Net of tax No Yes Yes Yes No No Yes No

In the income statement / Net of tax No Yes

Which of the following is an advantage of the single-step income statement over the multiple-step income statement? It does not imply that one type of revenue or expense has priority over another. Expenses are classified by function. It matches costs and expenses with related revenues. It reports gross profit for the year.

It does not imply that one type of revenue or expense has priority over another.

If common stock was issued to acquire an $8,000 machine, how would the transaction appear on the statement of cash flows?

It would not appear on the statement of cash flows but rather on a schedule of noncash investing and financing activities.

What is true about intraperiod tax allocation?

Its purpose is to relate the income tax expense to the items which affect the amount of tax.

Which of the following balance sheet classifications would normally require the greatest amount of supplementary disclosure? Current liabilities Plant assets Long-term liabilities Current assets

Long-term liabilities

Which of the following should be excluded from long-term liabilities? Obligations payable at some date beyond the operating cycle. Most pension obligations. Long-term liabilities that mature within the operating cycle and will be paid from a sinking fund. None of these answer choices are correct.

None of these answer choices are correct.

Where must earnings per share be disclosed in the financial statements to satisfy generally accepted accounting principles?

On the face of the income statement.

A company is not required to report a per share amount on the face of the income statement for which one of the following items? Prior period adjustment Continuing operations Net income Discontinued operations

Prior period adjustment

Which of the following is an example of managing earnings down? Changing estimated bad debts from 3 percent to 2.5 percent of sales. Revising the estimated life of equipment from 10 years to 8 years. Reducing research and development expenditures. Not writing off obsolete inventory.

Revising the estimated life of equipment from 10 years to 8 years.

Which item below is not a current liability? Trade accounts payable Stock dividends distributable Unearned revenue The currently maturing portion of long-term debt

Stock dividends distributable

Which of the following would be classified in a different major section of a balance sheet from the others? Stock investment in affiliate Capital stock Stock dividend distributable Common stock subscribed

Stock investment in affiliate

Which of the following is a current asset? Cash designated for the purchase of tangible fixed assets. Trade installment receivables normally collectible in 18 months. Investment in equity securities for the purpose of controlling the issuing company. Cash surrender value of a life insurance policy of which the company is the ben

Trade installment receivables normally collectible in 18 months.

Which of the following is an example of managing earnings up? Underestimating warranty claims. Writing off obsolete inventory. Accruing a contingent liability for an ongoing lawsuit. Decreasing estimated salvage value of equipment.

Underestimating warranty claims.

Which of the following is included in comprehensive income? Changes in accounting principles. Unrealized gains on available-for-sale securities. Distributions to owners. Investments by owners.

Unrealized gains on available-for-sale securities.

Typical contractual situations that are disclosed in the notes to the balance sheet include all of the following except lease obligations. pension obligations. debt covenants. advertising contracts.

advertising contracts

When a company discontinues an operation and disposes of the discontinued operation (component), the transaction should be included in the income statement as a gain or loss on disposal reported as:

an amount after continuing operations.

Balance sheet information is useful for all of the following except to assess future cash flows. compute rates of return. analyze cash inflows and outflows for the period. evaluate capital structure.

analyze cash inflows and outflows for the period

Free cash flow is calculated as net cash provided by operating activities less...

capital expenditures and dividends.

The correct order to present current assets is:

cash, accounts receivable, inventories, prepaid items.

The occurrence which most likely would have no effect on 2017 net income (assuming that all amounts involved are material) is the:

collection in 2017 of a receivable from a customer whose account was written off in 2016 by a charge to the allowance account.

The occurrence that most likely would have no effect on 2017 net income is the

correction of an error in the financial statements of a prior period discovered subsequent to their issuance.

The balance sheet contributes to financial reporting by providing a basis for all of the following except computing rates of return. evaluating the capital structure of the enterprise. assessing the liquidity and financial flexibility of the enterprise. determining the increase in cash due to operations.

determining the increase in cash due to operations.

An example of an item which is not an element of working capital is:

goodwill

The current assets section of the balance sheet should include:

inventory

The basis for classifying assets as current or noncurrent is the period of time normally required by the accounting entity to convert cash invested in:

inventory back into cash, or 12 months, whichever is longer.

Making and collecting loans and disposing of property, plant, and equipment are:

investing activities

Comprehensive income includes all of the following except unrealized holding gains. losses on disposal of assets. investments by owners. dividend revenue.

investments by owners.

The amount of time that is expected to elapse until an asset is realized or otherwise converted into cash is referred to as

liquidity.

Level 1 of fair value hierarchy measures are based on:

market prices for identical assets.

The income statement reveals...

net earnings (net income) of a firm for a period of time.

A statement of stockholders' equity includes a column for each of the following except common stock. retained earnings. net income. accumulated other comprehensive income.

net income

The net assets of a business are equal to: total assets minus total stockholders' equity. none of these answer choices are correct. current assets minus current liabilities. total assets plus total liabilities.

none of these answer choices are correct.

The accountant for the Lintz Sales Company is preparing the income statement for 2017 and the balance sheet at December 31, 2017. The January 1, 2017 merchandise inventory balance will appear

only in the cost of goods sold section of the income statement.